Glossary / Risk
Position sizing
Definition
Choosing how many shares, contracts or lots to trade based on your stop distance and risk budget.
Why it matters
Sizing off the stop rather than a fixed quantity keeps every loss the same size, which is what makes a sample of trades statistically readable.
Formula
Position size = (Account x Risk %) / Stop distance
Example
On a $25,000 account risking 1% ($250) with a $1.25 stop distance, the position is 200 shares.
How to track it in a journal
TradeStack calculates the core performance numbers — win rate, average win and loss, profit factor, expectancy, drawdown and consistency — automatically from imported trades, so position sizing stops being something you estimate and becomes something you read.
Related terms
R multiple
A trade result expressed as a multiple of the amount you risked.
Risk-reward ratio
The size of your planned target compared with the size of your stop.
Drawdown
The decline from a peak in your equity curve to the following trough.
Maximum drawdown
The largest peak-to-trough decline in your account history.
Questions that use this term
Keep reading
Trading journal guides
Expectancy, profit factor, drawdown, backtesting and the PDT rule.
Free trading calculators
Position size, risk-reward, expectancy and options profit.
Expectancy calculator
Expected profit per trade from your own numbers.
Broker CSV export guides
Step-by-step exports for Tradovate, NinjaTrader, IBKR and more.
Stop estimating your numbers
TradeStack is a free trading journal that calculates them from your own trades.
Start free